Sales promotions are a great way for your organization to incentivize potential customers to purchase. However, if you choose to invest in a sales promotion without fully understanding the elements that determine its success, your business runs the risk of losing more than just a few clients. Here are five essential elements of a successful sales promotion, and how you can use these elements to transform your organization.

With digital coupons, customers can enjoy discounts and special offers without dealing with the excess of conventional paper mailers. Consumers can easily locate and redeem offers from hundreds of sites on an as-needed basis, eliminating the need for bulky ‘coupon folders’ or coupon-stuffed wallets and purses. Digital coupons are a great example of sales promotions that generate significant return for little investment, with 44.5% of businesses expected to be investing in digital coupons for marketing purposes by 2016.

Marketing Pressure

Sales promotion methods that make use of digital coupons are generally successful for a reason. According to the American Marketing Association, a sales promotion is defined as “media and non-media marketing pressure applied for a predetermined, limited period of time in order to stimulate trial, increase consumer demand, or improve product quality." While this definition covers the broad details of sales promotion, the truth is that sales promotion is all about incentives. In essence, sales promotion gives potential customers an additional reason (or reasons) to consider doing business with you and your company.

The idea behind this is that once customers are willing to take that first leap of faith and try your product—whether through limited trial periods, discounts, special offers, free shipping, branded gifts, loyalty programs, or the aforementioned digital coupons—they’ll be satisfied enough with the results to be willing to invest further. Sales promotions allow businesses of all shapes and sizes to get a foot in the door, with the common end goal of boosting short-term and long-term sales numbers.

What Makes Sales Promotions Work?

That said, not all sales promotion is successful. For whatever reason, some promotions fail to capture the interest of prospective clients. While this may occasionally be the result of a mediocre product or service, more often than not the cause of this failure can be attributed to the campaign itself. To effectively motivate customers into doing business with your organization, your sales promotion strategy should include five elements:

1. A Target Audience Over the course of a lifetime, loyal customers spend upwards of 10 times the amount spent by average customers. The difficulty of any marketing effort lies in locating individuals who will eventually develop into brand advocates. Many marketers believe that by casting a large enough net, they’ll be able to locate those individuals simply by virtue of percentages. After all, if enough prospects are contacted, a percentage of those prospects is bound to journey through the sales funnel and become paying customers, and a smaller percentage of those customers will become loyal customers.

The problem with this mentality is that it’s remarkably inefficient, with only a small fraction of prospects and leads “paying off” to offset the initial investment. By predetermining a target audience, businesses can put their own finite marketing resources to better use. Through this process, businesses can target those most likely to become loyal customers without wasting any resources on those who aren’t.

The same can be said for sales promotion campaigns. In order to understand the best target audience for your promotion, you first need to understand more about the customers you already have. Send out a simple survey or questionnaire (or have one built directly into your site) that allows customers to share demographic data. Offer an incentive up front in order to get customers to take the time to share personal information.

Once you’ve a clearer idea of what kinds of people use your product or service, identify exactly what kinds of problems your product or service is designed to solve. With these two factors in mind, you should focus your sales promotion toward those who are most likely to be genuinely interested.

So, what's your strategy? Ask yourself what the most important objective of your promotion should be. Are you hoping to draw in new customers, or are you more inclined to focus on customer retention? Do you want your customers to purchase more frequently, or would you like for them to increase the average amount that they spend on a purchase? Are you attempting to increase the business that your organization gets during slower seasons or times of the day? Are you interested in regaining the attention of former customers who have taken their business elsewhere?

Determine exactly what you would like to accomplish with your sales promotion, and when possible, translate that goal into a specific number. This will allow you to chart your failure or success as the campaign progresses, and to identify aspects of your campaign that need to be amended or further developed.

3. Limited Availability Behavioral psychologists have found that human beings tend to assign greater value to things they perceive as being scarce. In a classic study performed in 1975, researchers had participants assign perceived value to identical cookies located in two identical jars. The only difference between the two jars was that one held 10 cookies, while the other held only two. The study discovered that while there was no apparent difference between the cookies or the jars, participants assigned greater value to the jar of two cookies.

When something seems limited, we naturally assign it greater value. We tend to want things we can’t have or that we fear that we won’t be able to have in the near future. At base, we’re animals that have a keen sense of regret, and we hate missed opportunities. The best marketers have learned how to take advantage of this very human phenomenon by offering limited-time deals. A sales promotion—such as a free gift with purchase—may seem like an attractive incentive for motivating sales, but unless that promotion is only available for a limited time or in limited quantities, then a large majority of customers will not be interested. On the other hand, if those customers are faced with the possibility of missing the promotion if they don’t act quickly, they’ll be far more likely to commit.

4. Sufficient Promotion Your promotion is an effort to draw customer attention to your organization’s product or service. But what about drawing attention to the promotion itself? In order for a promotion to be effective, it needs to be seen and understood by the same target audience identified back in point number-one. The question becomes, how does one promote a promotion?

The answer is that promotions can be promoted much like any other product or service. In-store signage, employee word-of-mouth, social media, your business’ website, email contact, flyers, paper mailers, articles in local publications, press releases, commercials and telephone contact may all be effective in letting your customers and prospective customers know about your sales promotion. Visibility is key, but be sure to account for the marketing cost of promoting your promotion (otherwise, you might end up spending more money on advertising than you’ll make back through increased sales). For this reason, it may be most beneficial to focus your promotional strategies on less-expensive—though still tightly focused—channels. For example, emails to interested parties have a very high rate of return, with 44% of email recipients making at least one annual purchase based on a promotional email.

5. Value When all is said and done, the customer is interested in just one thing from your organization: value. If your sales promotion doesn’t offer your prospective clients real value, then all of the limited-time offers and targeted marketing in the world isn’t going to make your sales promotion a success.

Ask yourself what kind of offer your potential customers will find most interesting, and then determine whether or not you can afford to give it to them. If you can, then you may have found the perfect sales promotion. If you can’t, then scale it back until you come to a compromise that will be interesting to your target audience, while still remaining cost effective for your organization

A Word of Warning

An effective sales promotion requires careful planning and budgeting, and is not something that should be undertaken casually. Businesses that have overreached with their sales promotions have been known to suffer significant losses due to the disparity between increased sales and the cost of the promotions themselves. To this end, it may be better to err on the side of caution. Before you invest a significant portion of your budget towards a grandiose promotion, first test the waters with smaller, more cost-effective promotions. You’ll get a better feel for how your potential customers might respond, and you won’t risk the future of your company to do so.

Whether you decide to offer digital coupons, give special gifts with every purchase, or invest in any other promotional campaign, be sure to take your time to do it right. Remember: A successful promotional campaign is one in which everyone benefits. If either you or your customers are coming away from the experience feeling unsatisfied, then you need to revisit and reevaluate how you are incorporating these five elements into your promotional strategy.